By Caroline Taylor

Following on from our blog Presenting Competitor Activity Metrics To Clients (which if you haven’t read you should totally check out) I am going to look at the implications of competitor bidding and the strategies you can form around the findings of these reports.

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Knowing who is bidding on the same terms as you can be a crucial part in deciding your own bidding strategy. In this blog, I will cover how competitors bidding on your terms can impact you, what you can do about it and some thoughts around whether you should be bidding on your competitors' brands.

How does competitor bidding impact my account?

When competitors are bidding on the same terms as you, whether these are brand or generic, the market gets more crowded meaning you need to up your game.

One of the most significant impacts is that more competition in the auction means keywords become more expensive. This is common in the generic space where no one has particular ownership over the keywords being bid on, and in many cases this is the cost of going after that more competitive generic market. However, when it comes to your brand terms, aggressive competitors can become a very frustrating situation to handle. On the whole, your brand terms will have better performance than your generics; there is more user intent from a customer who is already familiar with your brand and seeking it out.

In the following example, we can see in the first chart Competitor X has been increasing their aggression on our brand terms particularly toward the end of this period. We can see the impact this has on our cost by pulling a corresponding graph of our CPCs and mapping it to our impression share graph. You can see below that when Competitor X has increased their impression share it has caused our CPCs on these terms to increase if we continue to compete to stay in the top spot. 

Graph of Impression Share

Graph of CPCs

While this is focusing on brand terms the same applies for generic activity. This can be a real strain on budget, especially if this is something that becomes a regular occurrence, so next we will look at some of the ways you could navigate this situation.

How can I combat competitor bidding?

Competitive Messaging

One option is to test the messaging you are using when you are appearing against competitors. If all your competition is advertising Free Delivery is it more important to show that you also offer this, or to show what makes you stand out from the crowd ? This is something you can only really learn by testing as it may differ by industry vertical or situation. Browse what others are using in their copy to get ideas, but make sure to put your own spin on it to convey your brand’s tone of voice.

Set up the ad copy you are planning to test and change your campaign settings to rotate evenly to give your ads equal opportunity to show which makes it a fairer test. Wait a couple of weeks to gather sufficient data and then analyse metrics such as click through rate and conversion rate to see which messaging gives you the greatest chance against your competition.

Increase Investment

Another route to take is increasing your investment. You might be fortunate enough to be able to support this extra cost, particularly if your brand terms deliver significantly higher returns. However, most accounts have a budget for a reason, so then what?

The best thing to consider at this point is when there are valuable moments for your brand. You can pull back your bids during standard activity and then use large portions of budget to support the top positions during sale or offer periods.

Use Your Audiences

By identifying a hierarchy of your most valuable audiences you can tier how much you are willing to pay for each.

For example, you can use this simple ranking:

  1. Previous purchasers/customers
  2. Previous visitors
  3. Similar to previous purchasers/customers
  4. Similar to previous visitors

With this list you can tailor your approach based on how much you can afford to spend. If you have a larger budget, you can still show for users who aren’t in these lists but bid less for them. You can then add bid adjustments for these lists accordingly:

  1. Previous purchasers/customers: +50%
  2. Previous visitors: +30%
  3. Similar to previous purchasers/customers: +15%
  4. Similar to previous visitors: +5%

If this is still costing more than you would like, consider reducing it by removing the ‘similar to’ lists and concentrating on users who have engaged with your brand in the past.

Equally, if you are on a very strict budget you may decide rather than lowering your bids for users outside of these lists that for a period you are willing to forgo them altogether. Rather than overlaying these lists you can instead set them to target and bid so you are solely paying for these customers.

The above could work both as an always on strategy if this is a challenge you face all year round, or something you implement periodically when a competitor increases aggression during their own sale period.

Should I be bidding on my competitors?

This is a question that has many sides to it and is not a strict yes or no answer. I will therefore cover some of the pros and cons over taking this approach.

Pros:

  • You can try to steal traffic and customers away from your competitors. This may work especially well during periods when you know you are serving a better proposition, i.e. a discount or free gift
  • Cheaper than generic traffic. Depending on the vertical you are working in generic terms can be very expensive. Bidding on your competitor’s brand terms may actually be cheaper and prove to find customers with higher intent than generic searchers

Cons:

  • Brand loyalty. This could be a costly but fruitless exercise. If a user is looking for a specific brand it is likely that they have engaged with them before and had a good experience. They may click on your ad to see what else is out there but ultimately, they may return to your competitors – costing you clicks but not returning with conversions
  • Low Quality Score. Because you are bidding on terms that are not your own you will get a lower quality score for being less relevant. This can then result in higher CPCs for these terms.
  • Bidding war. This is probably the riskiest part of bidding on your competitors. As we have seen, access to the auction insights report means that your competitors will also be able to see when you start doing this. This may trigger them to start bidding on your brand terms causing your own CPCs to rise.

As you can see you have to weigh up your options carefully on this one or you might get yourself into a sticky situation – happy bidding!

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